"Swinging for the Fences" New York Governor Cuomo Unveils His Executive Budget for 2014-2015
New York Governor Andrew Cuomo presented his Executive Budget for fiscal year 2014-2015 yesterday. The Governor’s budget (the 4th of his current term) builds on the success of the prior three years of controlled spending which has turned a $10 billion State deficit into a $2 billion surplus and created 330,000 jobs. The proposed budget contains an ambitious agenda of tax cut programs (most of which were included in the recommendations recently put forth by the bi-partisan Tax Reform Commission) combined with expansion or creation of a host of new programs. In his own words, the Governor says this budget is “swinging for the fences.” The Governor called for passage of this budget to provide all New Yorkers “what they deserve” from their elected state officials.
For some historic perspective the Governor commented that there have been 23 budgets passed late over the last 30 years. All three annual budgets during Cuomo’s current term have been enacted on time, and he expressed his strong desire to pass this budget on time as well – noting that the last time New York passed four consecutive budgets on time was in 1973.
The budget proposal of $137.2 billion represents less than a 2% increase from the current $135.4 billion budget. Cuomo admits that the passage of this budget may require “more work” by the legislature since it includes many new policies and programs.
Highlights of the Governor’s budget include:
- Statewide Property Tax Relief: Cuomo pointed out that property taxes continue to be the largest burden in the State, more so than the personal income tax. The Governor believes that this is the result of too many levels of local government (there are more than 10,500 different local jurisdictions in New York). Property tax relief for taxpayers will be directly tied to the ability of local governments to work together to explore shared services and consolidation of services, with the goal of keeping local government spending to a maximum of 2% next year and a further 1% spending reduction in each of the following three years.
- Reduction of the corporate income tax rate from 7.1% to 6.5%.
- A credit for renters in the State.
- Reduction of the corporate tax rate to zero for upstate manufacturers.
- A 20% tax credit for manufacturers to reduce the property tax burden.
- A jobs program will continue to build on the success of the Start-Up NY program, including the marketing of New York State on a worldwide basis to attract additional business.
- Broad education reforms including the implementation of a state-wide full day Pre-K program (fully paid for by New York State), which would make New York only the 4th state to offer such a program. He also proposes the elimination of standardized testing for K through 2nd grade and a process for teacher evaluations.
- Creation of additional programs and enhancement of technology resources to enable the State to be better prepared to handle emergencies – noting that New York has endured a large number of federally declared disaster zones.
In his closing, the Governor gave an upbeat picture of the current and future State of New York and implored the legislature to pass this budget, which includes his tax, economic and capital spending plans. Cuomo insists that the adherence to spending cuts in Albany will provide the surplus needed to fund his programs.
According to the Governor, this budget addresses the concerns of liberals, conservatives, upstate and downstate interests that would typically collide, as in past budget debates. We will soon see if all of those groups feel the same enthusiasm as Cuomo. The cornerstone of the proposed budget is his assumption that state spending will continue to be held at the current 2% cap and that continued economic growth will continue to provide the State with the tax revenues that it currently receives. The failure of either of those assumptions to materialize would most likely lead to deficit spending. Others may argue that the State should not rush to spend the current surplus and should instead curtail some of the ambitious programs in a more conservative approach. It is now up to the legislature to challenge the Governor’s mandate to pass this budget – intact and on time.
Also of interest is how Cuomo’s budget proposal will impact the desire of New York City Mayor Bill DeBlasio to implement his proposed NYC personal income tax increase on wealthy City taxpayers. Revenue from the Mayor’s proposed tax increase was to be used for universal pre-K in New York City. Given that the Governor’s budget addresses this issue on a statewide basis and in view of Cuomo’s aversion to tax increases, this may spell the end of DeBlasio’s chances to have his tax increase plan passed in Albany. Shortly after the Governor’s address yesterday, Mayor DeBlasio continued his call for this tax increase noting that he won the Mayoral election by a wide majority based on a platform that included this increase. The Mayor also questioned whether New York City would receive sufficient funding from the Cuomo budget to cover all of the costs of the pre-K program in the City.
Marcum will continue to monitor the process of passage of the New York State budget as the debate moves forward. Please contact your Marcum tax professional with any questions.